MORTGAGE LOAN PURCHASE AGREEMENT

 

 

                        MORTGAGE LOAN PURCHASE AGREEMENT

 

      THIS MORTGAGE LOAN PURCHASE AGREEMENT dated as of December 29, 2004 by and

between   FIRST   HORIZON   HOME   LOAN   CORPORATION,    a   Kansas   corporation   (the

"Seller"), and FIRST HORIZON ASSET SECURITIES INC. (the "Purchaser").

 

      WHEREAS,   the Seller owns certain Mortgage Loans (as hereinafter   defined)

which   Mortgage Loans are more   particularly   listed and described in Schedule A

attached hereto and made a part hereof.

 

      WHEREAS, the Seller and the Purchaser wish to set forth the terms pursuant

to which the Mortgage Loans,   excluding the servicing rights thereto,   are to be

sold by the Seller to the Purchaser.

 

      WHEREAS, the Seller will simultaneously   transfer the servicing rights for

the Mortgage Loans to First Tennessee Mortgage Services, Inc. ("FTMSI") pursuant

to the Servicing   Rights   Transfer and   Subservicing   Agreement (as   hereinafter

defined).

 

      WHEREAS,   the   Purchaser   will engage FTMSI to service the Mortgage   Loans

pursuant to the Servicing Agreement (as hereinafter defined).

 

      NOW, THEREFORE, in consideration of the foregoing, other good and valuable

consideration,   and the mutual terms and covenants contained herein, the parties

hereto agree as follows:

 

                                   ARTICLE I

                                   DEFINITIONS

                                   -----------

 

      Agreement:   This   Mortgage   Loan   Purchase   Agreement,   as the same may be

amended, supplemented or otherwise modified from time to time in accordance with

the terms hereof.

 

      Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day

on which banking   institutions   in the City of Dallas,   or the State of Texas or

New York City is located are   authorized or obligated by law or executive   order

to be closed.

 

      Closing Date: December 29, 2004

 

      Code:   The   Internal   Revenue   Code of 1986,   including   any   successor or

amendatory provisions.

 

      Cooperative Corporation: The entity that holds title (fee or an acceptable

leasehold   estate)   to the   real   property   and   improvements   constituting   the

Cooperative   Property   and   which   governs   the   Cooperative    Property,    which

Cooperative   Corporation must qualify as a Cooperative Housing Corporation under

Section 216 of the Code.

 

      Coop Shares: Shares issued by a Cooperative Corporation.

 

      Cooperative   Loan:   Any   Mortgage   Loan   secured   by   Coop   Shares   and   a

Proprietary Lease.

 

<PAGE>

 

      Cooperative   Property:   The real   property and   improvements   owned by the

Cooperative   Corporation,   including the allocation of individual dwelling units

to the holders of the Coop Shares of the Cooperative Corporation.

 

      Cooperative   Unit:   A single   family   dwelling   located   in a   Cooperative

Property.

 

      Custodian:   First Tennessee Bank National Association,   and its successors

and assigns, as custodian under the Custodial Agreement dated as of December 29,

2004 by and among The Bank of New York,   as   trustee,   First   Horizon   Home Loan

Corporation, as master servicer, and the Custodian.

 

      Cut-Off Date: December 1, 2004.

 

      Cut-off   Date   Principal   Balance:   As to any   Mortgage   Loan,   the Stated

Principal Balance thereof as of the close of business on the Cut-off Date.

 

      Debt Service Reduction:   With respect to any Mortgage Loan, a reduction by

a court of competent   jurisdiction in a proceeding   under the Bankruptcy Code in

the    Scheduled    Payment   for   such    Mortgage   Loan   which   became   final   and

non-appealable,   except such a reduction resulting from a Deficient Valuation or

any reduction that results in a permanent forgiveness of principal.

 

      Deficient   Valuation:   With respect to any Mortgage Loan, a valuation by a

court of competent jurisdiction of the Mortgaged Property in an amount less than

the   then-outstanding   indebtedness under the Mortgage Loan, or any reduction in

the amount of principal to be paid in connection with any Scheduled Payment that

results in a permanent   forgiveness of principal,   which   valuation or reduction

results   from an order of such   court   which is final   and   non-appealable   in a

proceeding under the United States Bankruptcy Reform Act of 1978, as amended.

 

      Delay   Delivery   Mortgage   Loans:   The   Mortgage   Loans for which all or a

portion of a related   Mortgage   File is not   delivered   to the Trustee or to the

Custodian   on its   behalf on the   Closing   Date.   The   number of Delay   Delivery

Mortgage Loans shall not exceed 25% of the aggregate number of Mortgage Loans as

of the Closing Date.

 

      Deleted Mortgage Loan: As defined in Section 4.1(c) hereof.

 

 

      Determination   Date:   The earlier of (i) the third   Business Day after the

15th day of each month,   and (ii) the second   Business Day prior to the 25th day

of each month,   or if such 25th day is not a Business   Day, the next   succeeding

Business Day.

 

      GAAP:   Generally applied   accounting   principals as in effect from time to

time in the United States of America.

 

      Insurance Proceeds:   Proceeds paid by an insurer pursuant to any insurance

policy,   including all riders and endorsements thereto in effect,   including any

replacement   policy or policies,   in each case other than any amount included in

such Insurance Proceeds in respect of expenses covered by such insurance policy.

 

 

                                      -2-

<PAGE>

 

      Liquidation Proceeds:   Amounts, including Insurance Proceeds,   received in

connection with the partial or complete liquidation of defaulted Mortgage Loans,

whether   through   trustee's   sale,   foreclosure   sale or   otherwise   or   amounts

received in connection   with any   condemnation or partial release of a Mortgaged

Property.

 

      MERS:   Mortgage   Electronic   Registration   Systems,   Inc.,   a   corporation

organized and existing under the laws of the State of Delaware, or any successor

thereto.

 

      MERS Mortgage   Loan:   Any Mortgage Loan   registered   with MERS on the MERS

System.

 

      MERS   (R)   System:    The   system   of   recording    transfers   of   mortgages

electronically maintained by MERS.

 

      MIN: The Mortgage Identification Number for any MERS Mortgage Loan.

 

      MOM Loan:   Any   Mortgage   Loan as to which   MERS is   acting as   mortgagee,

solely as nominee for the   originator of such   Mortgage Loan and its   successors

and assigns.

 

      Mortgage: The mortgage, deed of trust or other instrument creating a first

lien on the property securing a Mortgage Note.

 

      Mortgage File: The mortgage   documents listed in Section 3.1 pertaining to

a particular Mortgage Loan and any additional   documents required to be added to

the Mortgage File pursuant to this Agreement.

 

      Mortgage Loans: The mortgage loans   transferred,   sold and conveyed by the

Seller to the Purchaser, pursuant to this Agreement.

 

      Mortgage Loan Purchase   Price:   With respect to any Mortgage Loan required

to be purchased by the Seller pursuant to Section 4.1(c) hereof, an amount equal

to the sum of (i) 100% of the unpaid   principal   balance of the Mortgage Loan on

the date of such purchase,   and (ii) accrued   interest thereon at the applicable

Mortgage   Rate   from the   date   through   which   interest   was   last   paid by the

Mortgagor   to the first day in the month in which   the   Mortgage   Loan   Purchase

Price is to be distributed to the Purchaser or its designees.

 

      Mortgage    Note:    The   original    executed   note   or   other   evidence   of

indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

 

      Mortgaged   Property:   The   underlying   property   securing a Mortgage Loan,

which,   with   respect to a   Cooperative   Loan,   is the   related   Coop Shares and

Proprietary Lease.

 

      Mortgagor: The obligor(s) on a Mortgage Note.

 

      Principal   Prepayment:   Any   payment   of   principal   by a   Mortgagor   on a

Mortgage   Loan that is received in advance of its   scheduled Due Date and is not

accompanied   by an amount   representing   scheduled   interest   due on any date or

dates in any month or months subsequent to the month of prepayment.

 

                                       -3-

<PAGE>

 

      Proprietary   Lease:   With   respect   to any   Cooperative   Unit,   a lease or

occupancy   agreement   between a Cooperative   Corporation and a holder of related

Coop Shares.

 

      Purchase Price: $476,494,384.38.

 

      Purchaser:   First   Horizon   Asset   Securities   Inc.,   in its   capacity   as

purchaser of the Mortgage Loans from the Seller pursuant to this Agreement.

 

      Recognition Agreement:   With respect to any Cooperative Loan, an agreement

between the   Cooperative   Corporation   and the   originator of such Mortgage Loan

which establishes the rights of such originator in the Cooperative Property.

 

      Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on

the   first day of the month   allocable   to   principal   and/or   interest   on such

Mortgage Loan which, unless otherwise specified herein, shall give effect to any

related Debt Service   Reduction   and any   Deficient   Valuation   that affects the

amount of the monthly payment due on such Mortgage Loan.

 

      Security   Agreement:   The security agreement with respect to a Cooperative

Loan.

 

      Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its

successors and assigns, in its capacity as seller of the Mortgage Loans.

 

      Servicing   Agreement:   The servicing   agreement,   dated as of November 26,

2002 by and between   First   Horizon Asset   Securities   Inc. and its assigns,   as

owner, and First Tennessee Mortgage Services, Inc., as servicer.

 

      Servicing Rights Transfer and Subservicing Agreement: The servicing rights

transfer   and   subservicing   agreement,   dated as of   November   26,   2002 by and

between First Horizon Home Loan Corporation, as transferor and subservicer,   and

First Tennessee Mortgage Services, Inc., as transferee and servicer.

 

      Stated   Principal   Balance:   As to any Mortgage Loan, the unpaid principal

balance of such Mortgage Loan as specified in the   amortization   schedule at the

time relating   thereto (before any adjustment to such   amortization   schedule by

reason of any   moratorium or similar waiver or grace period) after giving effect

to any previous partial Principal Prepayments and Liquidation Proceeds allocable

to principal   (other than with respect to any   Liquidated   Mortgage Loan) and to

the payment of principal due on such date and irrespective of any delinquency in

payment by the related Mortgagor.

 

      Substitute   Mortgage Loan: A Mortgage Loan substituted by the Seller for a

Deleted Mortgage Loan which must, on the date of such   substitution,   (i) have a

Stated   Principal   Balance,   after   deduction   of the   principal   portion of the

Scheduled   Payment due in the month of   substitution,   not in excess of, and not

more than 10% less than the Stated   Principal   Balance of the   Deleted   Mortgage

Loan;   (ii) have a Mortgage Rate not lower than the Mortgage Rate of the Deleted

Mortgage   Loan;   (iii) have a maximum   mortgage   rate not more than 1% per annum

higher or lower than the maximum   mortgage   rate of the Deleted   Mortgage   Loan;

(iv) have a minimum   mortgage   rate   specified in its related   Mortgage Note not

more than 1% per annum   higher or lower than the   minimum   mortgage   rate of the

Deleted   Mortgage   Loan;   (v) have the same   mortgage   index,   reset   period and

periodic   rate as the Deleted   Mortgage Loan and a gross margin not more than 1%

per   annum   higher   or lower   than   that of the   Deleted   Mortgage   Loan (vi) be

accruing   interest at a rate no lower than and not more than 1% per annum higher

than,   that of the Deleted   Mortgage Loan;   (iv) have a   loan-to-value   ratio no

higher than that of the Deleted   Mortgage   Loan;   (vii) have a remaining term to

maturity   no   greater   than   (and not more   than one year less than that of) the

Deleted   Mortgage   Loan;   (viii) not be a   Cooperative   Loan   unless the Deleted

Mortgage   Loan was a Cooperative   Loan and (ix) comply with each   representation

and warranty set forth in Schedule B hereto.

 

                                      -4-

<PAGE>

 

      Trustee:   The Bank of New   York and its   successors   and,   if a   successor

trustee is appointed hereunder, such successor.

 

                                   ARTICLE II

                                PURCHASE AND SALE

                                -----------------

 

      Section 2.1 Purchase Price. In consideration   for the payment to it of the

Purchase Price on the Closing Date, pursuant to written   instructions   delivered

by the Seller to the   Purchaser   on the   Closing   Date,   the Seller   does hereby

transfer,   sell and convey to the Purchaser on the Closing Date, but with effect

from the Cut-off   Date,   (i) all right,   title and interest of the Seller in the

Mortgage   Loans,   excluding   the   servicing   rights   thereto,   and all   property

securing such Mortgage Loans,   including all interest and principal   received or

receivable   by the Seller   with   respect to the   Mortgage   Loans on or after the

Cut-off   Date and all   interest and   principal   payments on the   Mortgage   Loans

received on or prior to the Cut-off Date in respect of   installments of interest

and   principal   due   thereafter,   but not   including   payments of principal   and

interest   due and payable on the Mortgage   Loans on or before the Cut-off   Date,

and (ii) all proceeds   from the   foregoing.   Items (i) and (ii) in the preceding

sentence are herein referred to collectively as "Mortgage Assets."

 

      Section 2.2 Timing.   The sale of the Mortgage Assets   hereunder shall take

place on the Closing Date. ------

 

                                  ARTICLE III

                             CONVEYANCE AND DELIVERY

                             -----------------------

 

      Section 3.1 Delivery of Mortgage   Files.   In connection   with the transfer

and   assignment   set forth in Section   2.1 above,   the Seller has   delivered   or

caused to be delivered to the Trustee or to the   Custodian on its behalf (or, in

the case of the Delay   Delivery   Mortgage   Loans,   will   deliver   or cause to be

delivered to the Trustee or to the   Custodian on its behalf   within   thirty (30)

days   following the Closing Date) the following   documents or   instruments   with

respect to each Mortgage Loan so assigned (collectively, the "Mortgage Files"):

 

      (a)    (1) the   original   Mortgage   Note   endorsed   by manual or   facsimile

            signature   in   blank in the   following   form:   "Pay to the   order of

            ________________,     without    recourse,"    with    all    intervening

            endorsements   showing   a   complete   chain   of   endorsement   from the

            originator   to the Person   endorsing   the   Mortgage   Note (each such

            endorsement   being   sufficient   to   transfer   all   right,   title and

            interest   of the   party so   endorsing,   as   noteholder   or   assignee

            thereof, in and to that Mortgage Note); or

 

                                       -5-

<PAGE>

 

                  (2)   with   respect   to any Lost   Mortgage   Note,   a lost   note

            affidavit   from the Seller   stating that the original   Mortgage Note

            was lost or destroyed, together with a copy of such Mortgage Note;

 

      (b)    except as provided   below and for each   Mortgage   Loan that is not a

            MERS Mortgage Loan, the original recorded Mortgage or a copy of such

            Mortgage   certified by the Seller as being a true and complete   copy

            of the   Mortgage,   and in the case of each MERS Mortgage   Loan,   the

            original   Mortgage,   noting the   presence of the MIN of the Mortgage

            Loans and either language indicating that the Mortgage Loan is a MOM

             Loan if the Mortgage   Loan is a MOM Loan or if the Mortgage Loan was

            not a MOM   Loan   at   origination,   the   original   Mortgage   and   the

            assignment   thereof to MERS,   with   evidence of recording   indicated

            thereon, or a copy of the Mortgage certified by the public recording

            office in which such Mortgage has been recorded;

 

      (c)    a duly   executed   assignment   of the Mortgage in blank (which may be

            included in a blanket   assignment or   assignments),   together   with,

            except as provided below, all interim   recorded   assignments of such

            mortgage (each such assignment,   when duly and validly completed, to

            be in recordable form and sufficient to effect the assignment of and

            transfer to the   assignee   thereof,   under the Mortgage to which the

            assignment relates);   provided that, if the related Mortgage has not

            been returned from the   applicable   public   recording   office,   such

            assignment   of   the   Mortgage   may   exclude   the   information   to be

            provided by the recording office;

 

      (d)    the   original or copies of each   assumption,   modification,   written

            assurance or substitution agreement, if any;

 

      (e)    either the original or duplicate   original   title policy   (including

            all riders thereto) with respect to the related Mortgaged   Property,

            if available,   provided that the title policy   (including all riders

            thereto) will be delivered as soon as it becomes   available,   and if

            the   title   policy   is not   available,   and to the   extent   required

            pursuant to the second   paragraph   below or otherwise in   connection

            with the rating of the Certificates, a written commitment or interim

            binder   or   preliminary   report   of the   title   issued   by the title

            insurance or escrow company with respect to the Mortgaged   Property,

            and

 

      (f)    in the case of a   Cooperative   Loan,   the originals of the following

            documents or instruments:

 

                  (1) The Coop Shares, together with a stock power in blank;

 

                  (2) The executed Security Agreement;

 

                   (3) The executed Proprietary Lease;

 

                                      -6-

<PAGE>

 

                  (4) The executed Recognition Agreement;

 

                  (5) The executed   UCC-1   financing   statement with evidence of

            recording   thereon   which have been filed in all places   required to

            perfect the Seller's interest in the Coop Shares and the Proprietary

            Lease; and

 

                  (6) Executed UCC-3 financing   statements or other   appropriate

             UCC   financing   statements   required   by   state   law,   evidencing   a

            complete   and unbroken   line from the   mortgagee to the Trustee with

            evidence   of    recording    thereon   (or   in   a   form    suitable   for

            recordation).

 

      In the event that in connection   with any Mortgage Loan that is not a MERS

Mortgage Loan the Seller cannot   deliver (i) the original   recorded   Mortgage or

(ii) all interim recorded assignments   satisfying the requirements of clause (b)

or (c) above, respectively,   concurrently with the execution and delivery hereof

because such document or documents   have not been   returned from the   applicable

public   recording   office,   the   Seller   shall   promptly   deliver or cause to be

delivered to the Trustee or the Custodian on its behalf such   original   Mortgage

or such   interim   assignment,   as the case may be, with   evidence   of   recording

indicated   thereon upon receipt thereof from the public recording   office,   or a

copy thereof,   certified, if appropriate,   by the relevant recording office, but

in no event   shall any such   delivery   of the   original   Mortgage   and each such

interim assignment or a copy thereof, certified, if appropriate, by the relevant

recording   office,   be made   later than one year   following   the   Closing   Date;

provided,   however,   in the event the Seller is unable to deliver or cause to be

delivered by such date each Mortgage and each such interim   assignment by reason

of the fact that any such   documents   have not been returned by the   appropriate

recording office, or, in the case of each such interim   assignment,   because the

related Mortgage has not been returned by the appropriate   recording office, the

Seller shall deliver or cause to be delivered   such   documents to the Trustee or

the Custodian on its behalf as promptly as possible upon receipt thereof and, in

any event,   within 720 days following the Closing Date. The Seller shall forward

or cause to be forwarded to the Trustee or the   Custodian on its behalf (i) from

time   to   time   additional   original   documents    evidencing   an   assumption   or

modification   of a Mortgage   Loan and (ii) any other   documents   required   to be

delivered by the Seller to the Trustee.   In the event that the original Mortgage

is not   delivered   and in   connection   with the   payment in full of the   related

Mortgage Loan and the public   recording   office   requires